Originally published by AxiTrader
Last week I spent a lot of time writing about the five key drivers I distill everything down into when I'm thinking about the Australian dollar. I discussed how the positives of global growth and investor sentiment were offset by a contracting Australian-US bond spread and a recovery in the US dollar.
On the other factor - technicals - I also noted that while the Aussie dollar had really been trapped in a range recently it had tested, and was still mapping out a potentially bearish wedge pattern.
So it's no real surprise this morning that the Aussie dollar is under a little pressure at 0.7635.
And perhaps with a massive week of data which includes retails sales for February and monthly inflation data for March, the RBA and governor Lowes speech, and trade for February tomorrow, maybe traders are betting on a mild undershoot of data and slightly dovish RBA.
It's difficult to know. But given Australian data has underperformed the uptick in global data releases for the past 3 months perhaps that's not a bad assumption.
But given Australian data has underperformed the uptick in global data releases for the past 3 months perhaps that's not a bad assumption.
Indeed the latest update on Friday showed Australian data has dipped back into negative territory. That could change today with solid inflation and retail sales...we'll see.
Looking at the RBA and its potential impact on the currency I doubt they'll be in any hurry to cut - or signal a move in that direction - given they are fighting a battle to restrain rampant house price growth and investor loan demand right now.
But that doesn't mean they won't signal some concern about the economy.
So until we see how the data flows here in Australia, and across the planet this week, it's probably right for Aussie dollar traders to be cautious.
That's particularly the case given the way the charts look right now.
While the Aussie has been stuck in a range below 0.7750 and above 0.7490/0.7520 for some time it is mapping out a slightly ominous wedge formation. While I wouldn't get overly concerned unless 0.7580 gives way the level to watch today is 0.7608.
Here's the chart:
But the key right now is just like different sectors of global stock markets, and different nations are benefiting from traders and investors differing views of winners and losers.
Forex markets are no different right now. The yen and euro have differing outlooks, the pound looks good, the Mexican peso and Korean won are doing well. SO it's about traders estimate who will be the winners and losers.
That of particular interest to Aussie dollar traders as presidents Xi and Trump prepare to meet. A trade war is still a low probability I think. But it would not be good for anyone in the global economy. And Australia would be unable to avoid the actual
The Australian dollar, and Australia, would be unable to avoid the actual and psychological fallout if this week's meeting goes badly.
As I say - I don't expect that. But its just another risk. And then of course we have non-farm payrolls Friday night.
Have a great day's trading.